Bank Debt Collection Practices Getting Scrutiny From Feds

It started with allegations back in 2011 that JPMorgan Chase, the country’s largest mortgage lender, was robo-filing lawsuits against debtors. The lawsuits, riddled with errors, bore a striking resemblance to the robo-signing debacle in the wake of the housing market implosion.
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Now, our Miami foreclosure lawyers have learned that federal regulators are expanding that probe, determined to find out if other banks also were using flawed records or incomplete documents to collect on credit card debts that were delinquent.

Specifically, the Office of the Comptroller of the Currency is hoping to determine whether the process used by numerous banks to verify the debt before filing suit was adequate.

This mirrors the allegations – later proven – in the midst of the foreclosure crisis, where mortgage servicers signed off on hundreds of thousands of documents without actually reviewing them. Ultimately, this was a form of fraud.

Today, we see banks that have filed hundreds of thousands of lawsuits against people whose credit card debt has ballooned in the midst of the Great Recession. Millions of people fell behind on their credit card payments – just as they did with their mortgages. By 2009, the charge-off rate was somewhere in the neighborhood of $85 billion.

But it wasn’t long before attorneys for consumers began to take note of the fact that many of these cases were built on a house of cards, with the evidence of default flimsy at best.

So pervasive was this kind of action that the California Attorney General’s Office filed suit against JPMorgan, alleging that the firm signed off on hundreds and hundreds of legal documents without any real knowledge of whether the facts contained therein were truthful.

A former bank employee blew the whistle back in 2011, alleging that some 25,000 reportedly delinquent credit card accounts were teeming with error and falsities. The whistleblower later sued the bank for wrongful termination, and settled out of court.

Previously, the OCC and the newly-formed Consumer Financial Protection Bureau filed a $210 million lawsuit against Capital One for tricking millions of customers into buying credit card services that were both unnecessary and expensive.

If in the course of this most recently-expanded inquiry, the OCC discovers there have been widespread debt collection abuses, it could do one of several things. Most likely, it would slap the banks with fines and issue some kind of order that would demand an about-face on these unfair practices. It’s also possible that some bank executives could face criminal prosecution, but that has historically been so rare – even in the most egregious cases of fraud and abuse – that our Miami foreclosure attorneys doubt that federal prosecutors would pursue that route.

If these allegations are proven (and we have a strong suspicion they will be) it will show once again that the banks have learned nothing from all the other corrective actions lodged against them in recent years. These institutions have had to pay billions upon billions of dollars in fines and reimbursement to American taxpayers and consumers for their wrongdoings in the housing sector. And yet, these same companies turn around and do the exact same thing to credit card consumers.

We can only hope that this time any action by federal regulators will have teeth large enough to take a real bite.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.

Additional Resources:
US taking harder look at debt collection practices, May 29, 2013, By Danielle Douglas, The Washington Post
More Blog Entries:
Florida Mortgage Settlement Compliance Questioned by AG Bondi, June 9, 2013, Miami Foreclosure Lawyer Blog